Coca-Cola Abandons Expansion Plans in India Because of Water

Chairman and CEO of The Coca-Cola Co., Muhtar Kent, right, holds a bottle of Coca Cola and President and CEO of Coca Cola India and South West Asia Atul Singh pose for photos before the start of a meeting in New Delhi, India, Tuesday, June 26, 2012. The world’s biggest beverage maker plans to invest US$5 billion in India from 2012 to 2020. It has already invested more than US$2 billion since re-entering the country in 1993.
((AP PHOTO/MANISH SWARUP))

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Coca-Cola has been planning a major expansion push in India. The All-American soft drink maker was hoping to expand production in the country with a major new bottling plant, however, they have now abandoned their fizzy, bubbly ship.

Expansion was focused on a large factory in Mehdiganj, near Varanasi, India. Though the deal seemed mutually beneficial to locals and the brand initially, Coca-Cola was soon hit with regulatory issues and protesters. The plant requires heavy water supplies, including drilling into groundwater reserves. The protesters called this an "over-exploitation of ground water." Since the plant opened, groundwater levels dropped 26 feet.

The Coca-Cola plant in Mehdiganj first opened in 1999 and the recent expansion cost an additional $25 million. While this money would certainly boost the local economy, the environmental dangers were too much for many locals. The protests have been going on for almost a year, as activists urged the government to dismiss the expansion out of water pollution concerns.

Hindustan Coca-Cola offered this statement to Alok Ranjan, the Chief Secretary of the Uttar Pradesh government, as obtained by Economic Times,"Due to inordinate delay in receiving of the no-objection certificate, causing delay in expansion of capacity, leading to financial losses, we have decided not to pursue the expansion at Varanasi."

The India Resource Center, which has led the protests, was thrilled with the regulatory issues Coca Cola ran into. "We are delighted that the (Union) government is doing what it is supposed to do — protect the common property resource of groundwater from rampant exploitation, particularly in water-stressed areas," Amit Srivastava of the Center told Business Standard. " This should serve as a notice to other companies that they cannot run roughshod over Indian rules and regulations and deny community rights over groundwater."

Although plans for the expanded plant will not go forward, Coca Cola is seeking another location for expansion and plans on continuing the smaller operation in Mehdiganj. In the meantime, Coca-Cola will be limited to production of 600 bottles per minute at the old factory, per the regulations of the National Green Tribunal, which works to make sure groundwater is used safety and without increasing pollution.